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Study: Jamaica still among cheapest places for gas

Published:Friday | May 9, 2014 | 12:00 AM
A Total gas station in Kingston. - File

A Government of Jamaica-commissioned study on the scope for imposing GCT on petroleum products will guide possible implementation in fiscal year 2015-16, says local firm UHY Dawgen Chartered Accountants.

Commissioned by the Ministry of Finance, the study forms part of commitments for tax reform made under the International Monetary Fund agreement.

If GCT is levied on petroleum products, registered companies will be able to claim the tax paid, said the accounting firm.

UHY Dawgen's statement was made in tandem with the release of a new study by UHY International on petrol costs internationally.

The study affirms that Jamaica is among the "least expensive" sources of automotive fuel.

The accounting firm notes that Jamaica averages 20 per cent tax on petrol, diesel and LPG combined. Those taxes do not include GCT, which would be the equivalent of a VAT seen elsewhere, the researchers said.

"The cost of filling the tank of a Ford Transit van with diesel in Jamaica may cost a motorist as high as US$103.48 if using automotive diesel. Service dealers usually add their markup, which may result in a higher or lower overall cost to the consumer," said the report.

Comparatively, gas taxes in the United Kingdom amounts to 60 per cent, while the cost to fill the tank of the same Ford Transit van is US$184, UHY said.

"Jamaica is close in comparison to one of the world's largest economies, China, who have extremely low fuel taxes. Jamaica does not fall very far from its benchmark, the US, in cost of petrol and diesel," says UHY.

lighter tax burdens

In general, emerging economies have lighter fuel-tax burdens, and some even offer subsidies, said the report. In contrast, European companies are "struggling with the world's highest fuel costs, including 60 per cent tax on petrol which gives Britain, France and Germany some of the highest pump prices worldwide".

Jamaica levies taxes of 19 per cent on diesel and 20 per cent on petrol, states UHY.

Taxes amount to 59 per cent of the cost of diesel in the UK, which is the highest in any major economy. France levies 43 per cent tax on diesel, while Germany levies 58 per cent," said UHY.

"As diesel is used in the majority of commercial vehicles, this heavy burden is borne primarily by businesses."

It points out that even for liquefied petroleum gas, or LPG, used for cooking, the UK still levies taxes of 60 per cent, which is "the highest in the developed world by some distance," the report said.

France levies an 11 per cent tax on LPG, while Germany levies 33 per cent. Consumers in those countries would pay US$146 and US$158, respectively, to fill the Ford Transit van, said UHY.

The United States levies just 13 per cent on petrol and 12 per cent on diesel, whereas China levies no taxes on these fuels.

Malaysia subsidies fuel at a rate of 30 per cent on petrol and 40 per cent on diesel, costing the Malaysian government an estimated US$14 billion per year, the study found.

"The subsidies have also led to issues with the smuggling of fuel into neighbouring China and Indonesia, which have a much higher cost of fuel," the study concluded.